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    Introduction to Macroeconomics

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    Determine if it represents fiscal policy or monetary policy, and explain your answer.

    Paul Volker was chairman of the Federal Reserve system in the late 1970's and through most of the 1980's. In the late 1970's and into the early 80's the United States was experiencing high inflation, reaching double digits of 10% and more. To reduce the inflation rate Mr. Volker dramatically increased interest rates to slow down the economy, and this plunged the US into a steep recession.

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    Solution Preview

    Immediately, you can tell that this is monetary policy.

    Now, let me explain why.

    Monetary policy is conducted by the central bank (or the Fed ...

    Solution Summary

    This solution provides an explanation as to why this scenario is representative of either fiscal or monetary policy. This is completed in 90 words.